Besides Britain's South Sea Bubble, France also experienced the Mississippi Bubble around 1720.
The Sun King, Louis XIV, had achieved many glorious victories, but he had also drained France's treasury and left the government buried in debt, nearly on the verge of collapse. This became the principal inheritance of Louis XV.
Through political intervention, John Law established a private bank that could issue currency, and the banknotes he issued could be used to pay taxes. Because John Law's bank developed steadily while gold and silver prices frequently depreciated due to the government's unwise interventions, the reputation of Law's bank soared. It monopolized tobacco sales and gained sole authority over the reminting of gold and silver coins, eventually being nationalized as the Royal Bank in 1718.
During this period, John Law acquired all manner of trade charters. The Mississippi Company he founded held trade rights over the vast Mississippi River basin and Louisiana on the river's western bank.
At first, the royal government stipulated that the banknotes issued by his bank had to be exchanged for gold and silver coins at fixed rates. However, the reserves of precious metals severely constrained the bank's ability to expand its currency and credit.
At this time, paper money could barely still be called representative currency. Once paper money became detached from precious metals and was no longer backed by any precious metal, it became fiat currency. In 1719, the renamed "Royal Bank" inspired greater public confidence. At first, John Law declared that his banknotes could be exchanged for coins, but half a year later, he announced that banknotes would no longer be guaranteed exchangeable for silver coins.
At the same time, he announced a one-hundred-million-livre gold mine development project in Louisiana, displaying the Mississippi Company's brilliant prospects. Two hundred thousand shares were issued at